It takes real courage to go through the bankruptcy process, because you’re admitting that you need help to put your finances back in working order. Most people who are forced to file for bankruptcy take a very dim view of what their lives will be like while they’re rebuilding their credit rating. This is pretty far from the truth however, because bankruptcy isn’t designed to ruin your life, but instead to help you rebuild your life. That still doesn’t change the fact that you need to make some very positive decisions to enjoy a brighter financial future:
Forgive Yourself
You’ll find it very difficult to take positive action if you’re living in a negative frame of mind, and this is exactly why you need to forgive yourself for making a mess of your finances. Everyone makes mistakes, and the sooner you can forgive yourself for this one then the sooner you can start rebuilding your life, and your credit score.
Budgeting
Working to a budget would have prevented you from having to declare bankruptcy in the first place, so from now on you set yourself a budget, and you stick to it. You’ll learn to avoid spending on things you don’t need, including takeaway pizza, big screen TVs, and clothing you’ll never wear. You’ll also learn to reduce your grocery bill to a fraction of what it previously was, and you’ll still get to enjoy all the foods you did before, but maybe not from the same brand names. Couponing helps, look for discounted deals, 2-for-1 deals, and short-dated produce that you can cook on the same day. You could even set yourself the challenge of living on $25 of food for one week (1 person), and testing yourself to achieve this – it’s quite easy to do this if you shop smart. There are plenty of free online tools to help you budget properly, so there’s no excuse for not starting today.
Credit Cards
Although this might sound like the worst advice you’ve ever been given, it’s actually a good idea to get a credit card after you declare bankruptcy, if that’s possible. Why? Because it’s one of the quickest ways to repair your credit score, simply because credit bureaus pay more attention to your credit card spending than almost anything else. It’s unlikely you’ll be able to get an unsecured credit card though, because these are the same types of cards you used which resulted in your bankruptcy filing. What you might have more success with is a secured credit card, where you deposit a fixed amount into a bank account, and you’re then given a card with that limit. For the credit card company this is a win-win, and for you it puts you on the road to rebuilding a healthy FICO score.
Bills
Make absolutely certain that not only do you pay your bills on time each month, but if at all possible make a slight overpayment on them. The benefits of doing this are that you create the healthy financial habit of paying your bills on time, and in full, but also reducing the cost of your next bill before it arrives. Making advance payments on your bills also has a very positive effect on your FICO score.
Lines of Credit
The very last thing you might want to do is open a new line of credit, especially after going through the ordeal of bankruptcy. The reason you might want to consider this is that establishing a new line of credit and then making your repayments on time for that line of credit, is one of the quickest ways to get your credit score heading in the right direction again.
Savings Account
Although this might be a struggle, it’s really important to start saving as soon as you possibly can after your bankruptcy goes through. You’ve had all, or most, of your debts discharged, so now is the perfect time to start putting away a few dollars for those unforeseen future events which probably landed you in financial hot water in the first place. Savings also serves the dual purpose of showing that you’re now a financially responsible person, who no longer spends their entire income each month. Saving on a regular basis won’t always directly affect your FICO score, but it will put you in better standing with your bank.